LBTT ‘operationally successful’ but too early to assess impact on market

homes for saleScotland’s transition to the new Land & Buildings Transaction Tax (LBTT) was “operationally successful” but it is “too early to draw any definitive conclusions” on its impact on the property market, MSPs on a Holyrood committee have said.

A report by the Scottish Parliament’s finance and constitution committee scrutinised the first year of LBTT, which replaced stamp duty in Scotland in April 2015.

The majority of stakeholders who contributed to the parliamentary inquiry agreed that the rates had been of benefit to the first time buyer housing market.

Finance secretary Derek Mackay told the committee that nearly 9,700 homebuyers who would have had to pay stamp duty did not have to pay LBTT when buying a home, and that a further 41,700 paid less as a result of changes to the charges for properties costing between £145,000 and £325,000.

Now MSPs want to know the impact the change has had on the first-time buyer market, as there are no fees on properties worth up to £145,000, and if this has contributed to increased house prices.

They also suggested the government’s review of the LBTT should consider if there is any behaviour response in relation to properties costing between £325,000 and £750,000, where the charges have increased.

Ministers have also been asked to respond to claims from the Scottish Fiscal Commission that the market for homes in that bracket “remained subdued” throughout most of the fiscal year.

Finance and constitution committee convener, Bruce Crawford MSP, said: “It’s reasonable to say year one of the LBTT went smoothly and was operationally successful. That said, a key challenge for us has been the lack of consistency in the presentation of data relating to LBTT. That made it difficult to compare forecast and outturn data and to fully assess the tax’s impact on the property market in Scotland.

“There are also challenges in identifying ‘causality’ for the changes seen in the housing market - in short, it’s difficult, based on the data, to separate out the impact of LBTT rates and bands from extraneous factors, such as the general economic situation.

“Our committee therefore recommends that the Scottish Government’s review of the first year of LBTT includes an analysis of the behavioural response to LBTT, particularly in relation to homes costing between £325k and £750k. This should include an assessment of the likelihood of an on-going response and an analysis of the impact of extraneous factors.”

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